Definition ∞ Investment liquidity refers to the ease and speed with which an asset can be converted into cash without significantly affecting its market price. Highly liquid assets can be bought or sold quickly without substantial price concessions. This characteristic is a key consideration for investors, influencing portfolio management and risk assessment. It reflects market depth and trading activity.
Context ∞ In the digital asset space, investment liquidity is a constant focus, particularly for newer or smaller cryptocurrencies and non-fungible tokens. The discussion often addresses factors like trading volume, market depth on exchanges, and the presence of automated market makers. A critical future development involves advancements in decentralized exchanges and cross-chain liquidity solutions to improve capital efficiency across various blockchain networks. This provides essential context for news about market volatility, exchange performance, and the overall health of digital asset trading environments.
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